Double-Entry Book Keeping - Transaction 2

Transaction 2.

The payment of rent in the sum of £500 by J. Soap is interpreted as a flow of money from the cash book to the rent account. It reduces cash by £500 and appears as an increase in the balance shown in the rent account by £500. The rent account is an 'expense' account which will be transferred later to the income statement for the purposes of calculating the net income for April. The entries will appear as follows:

Cash book Rent account

Rent £500 Cash £500


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Read on: Double-Entry Book Keeping - Transaction 1

Transaction 1.

The initial investment of £10,000 cash by J. Soap in the ladies hairdressing business would be shown as a flow of money from the capital account to the cash book, as follows:

Capital account Cash book

£10,000

Business transactions are represented in double-entry book-keeping as flows of money or money value as between the various accounts concerned, but clearly any one transaction involves only one flow, as shown above. In order to identify the direction of any one flow, all accounts are divided into two parts. A flow out of the account... see: Double-Entry Book Keeping - Transaction 1